What Verizon's iPhone Announcement Means for the Industry

Verizon announces it will carry Apple's iPhone.

What does a Verizon iPhone mean? Well, first off, there's no doubt it is terrible news for AT&T, which, until now was the only cellular network on which Apple loyalists could use the company's extraordinarily popular smartphone. But both critics and customers have long agreed that AT&T's service was the worst thing about the iPhone. Now customers interested in the Apple gadget-and-app universe have another place to turn.

I'm an iPhone user myself, and there is no doubt that AT&T has earned its reputation for terrible service over the past few years—at least in areas such as New York and San Francisco, where iPhone concentration is high. (At the Consumer Electronics Show in Las Vegas last week, which the concentration of tech geeks rivals the annual migration of monarch butterflies, the iPhone was virtually unusable.) So the potential for a mass defection to Verizon is inevitable. Although with last summer's launch of the iPhone 4 and more recent aggressive discounting of iPhones, AT&T has definitely constructed a buffer for itself in the form of millions of two-year contracts.

The iPhone 4 will go on sale for Verizon early next month (existing subscribers can pre-order on February 3, the rest of customers will be able to buy on February 10), working on the CDMA/EVDO network. Pricing will be $200 for a 16GB device, $300 for 32GB, both require a two-year contract. Also, Verizon will offer hotspot capability on the device that will connect up to five additional devices. Verizon would not discuss plan pricing, promising to follow up on pricing strategy in the coming weeks. There were also plenty of hints at extending Apple technology on the network in the future. "This is just the beginning of our relationship," said Apple COO Tim Cook.

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The most interesting thing to watch over the next two years will be how Verizon's network holds up under the strain of new iPhone users as well as the legions of Android phone users who are adopting Google's competing smartphone format. Verizon has recently upgraded parts of its network to 4G LTE service, but the iPhone 4, despite its name, doesn't support LTE (Cook admitted that first-generation LTE chipsets would have forced design compromises that Apple wasn't willing to make), leaving it to operate on—and crowd—the company's 3G CDMA/EVDO service. Verizon has, until now, gotten top rankings for customer satisfaction, and company reps at the announcement stressed that they have upgraded the network in anticipation of the iPhone and that it has "more than enough capacity" to handle any extra traffic that comes from the coming flood of smartphone subscribers.

Ironically, if customers do, indeed, flee from AT&T, that company's service is bound to improve as traffic and network congestion decreases. But reputations take longer to repair than networks, and AT&T has dug itself a deep ditch of customer dissatisfaction to climb out of. Whatever the outcome, smartphone competition is likely to be beneficial to consumers. A hemorrhaging AT&T is more likely to discount its service, and since the iPhone is largely identical across services, it's possible that the cellular providers will compete by throwing in network features such as tethering (which Verizon has already promised with its WiFi hotspot functionality) and turn-by-turn navigation. The world of wireless didn't necessarily advance technologically today, but it got a bit more wild.

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